Auckland Mayor Phil Goff is calling on the government to return the GST Aucklanders pay on their rates to the council in a bid to support the city’s growing infrastructure costs.
And he says it would increase the Super City’s revenue by $270 million a year.
His comments follow the release of a damning new report by the Auditor-General which has raised serious concerns about the growing debt levels and rising costs many of the country’s councils now face.
The report was presented to parliament last week and follows a nationwide audit of the 10 year long-term plans (LTPs) produced by New Zealand’s councils’ for the 2018-2028 period.
“Councils are facing many significant and often conflicting pressures. Difficult decisions will need to be made as a result,” Auditor-General John Ryan says. “This will lead to challenges regarding how to fund this extra spending, particularly for growth councils that are starting to reach the debt limits they have set. Council rates are forecast to continue to increase, and, for many communities, these increases are likely to be proportionately more than the increase in their other household costs or income.”
Goff says he agrees with the Auditor General’s findings and says Auckland is at ground zero for many of the country’s growth problems.
He says Auckland is now responsible for 38% of the country’s Gross Domestic Product (GDP) and is a key driver of New Zealand’s economy. But with the city having to cope with 30-50,000 extra people every year it’s creating an enormous amount of pressure on the city’s infrastructure.
“Our ability to just borrow money to pay for it has almost been exhausted,” Goff says. “We know from [the credit rating agency] Standard and Poor’s that if we exceed our debt to revenue ratio of 270% that we will jeopardise our credit rating,” Goff says.
Auckland Council debt accounts for 50% of the country’s total local government debt. And it’s forecast to increase by 42% from $9.2 billion to $13.1 billion between 2018/19 and 2027/28.
Goff says if Auckland Council received a credit downgrade this could have a flow on effect, with the Local Government Funding Agency expected to face a credit downgrade as well.
“I’m not saying they should exempt rates from GST, but the government could at least return the GST Aucklanders pay on their rates,” Goff says.
And he says his proposal isn’t unfair to the rest of the country.
“We’re just asking for our fair share of the revenue based on our contribution to New Zealand’s GDP.”
Goff says Auckland Council’s principal source of revenue is still rates, but he says there is a political limit to how much it can keep increasing them every year.
“What we’ve been saying to the government is we need a broader revenue base and we can’t afford to underinvest in our infrastructure without creating major problems. Returning the GST that Government charges on rates, which is a tax on a tax, would be in line with repeated proposals for government to revenue share with local authorities.”
He says whether it’s the housing affordability crisis and traffic gridlock, to the need for better public transport and climate change, Auckland has a number of major issues that it needs to find the money for. And it can’t do it on rates alone.
“We can’t hammer ratepayers every time we need the funding to do something, or go cap in hand to the government.”
Goff concedes Auckland Council can always try and do a better job of managing its finances.
“I admit the council has to find more efficiencies and get better value for money.”
He says Auckland has more in common with a large Australian city than it does with many of the other metropolitan centres in New Zealand. But Goff says unlike Australia we don’t have a state government system which would provide a city the size of Auckland with additional revenue.
The state governments in Australia devolve some of their abilities to raise tax revenue to the cities. While the Australian Federal Government shares some of the revenue it raises, including all of the GST, with the states.
He says the council has been working with the government to find new ways to fund housing infrastructure. While the Auckland Regional Fuel Tax which was introduced in July last year to fund transport projects is a step in the right direction. The regional fuel tax is projected to raise $1.5 billion for the city over the next 10 years.
But the costs keep piling up and Goff says in the next 20 years 40% of all New Zealanders will live in the City of Sails.
“If the government gave back to us the GST they collect from our rates that would allow us to do some of the other big things we’ve got ahead of us.”
Meanwhile the Productivity Commission has been carrying out an inquiry into the financing and funding of local government in New Zealand.
Submissions on the commission’s issues paper closed on February 15 and it is expected to release a draft report on the issue in June before presenting its final report to the government on November 30.
Finance Minister Grant Robertson was unavailable for comment.
23 Comments
Mr Mayor please let me remind you GST on rates is a tax on tax and should never have been applied so the Council/ government is ripping rate payers by doing that. How about you start looking at your shop, cut expenses, reduce waste ie millions of colored flyers printed to tell people about upcoming events when all that information could easily go online to the council website. No one reads flyers anymore and it all ends up in landfill so how about making changes at the council so you guys can learn to live with your means as every other household has to do. The council is already squeezing Auckland with the regional fuel tax, bed tax etc can you please tell as what is being done with the money being collected as a rate payer i don't see any benefit yet. I bet it went towards more team lunches/dinners so the folk from the council can ponder how they can fix Auckland's problems by hiring more people to print flyers and pat yourselves on the back to justify that 10% pay increase each year. This Mr mayor is going to be your legacy for many years to come, so how about you start doing something constructive for a change.
Wouldn’t it be nice, if instead of concentrating on how to get more money, Mr Goff applied himself to how to stop squandering money. Typical old hat Labour tax grabber. Get the cream on top of the pail, don’t worry about the milk falling through the holes in the bottom.
Indeed, for goodness sake just raise rates. Time to stop trying to accumulate as much debt as possible to leave it all to following generations, and fund more from current moneys.
We've heard over and over on this forum that Auckland is a global city and it's never been cheap to live in a global city. There is precisely zero reason to assume it should be affordable for a person to occupy a large chunk of inner city land without income, yet it should be unaffordable for people with income to purchase that land.
We've had this weird double standard where it's hailed as important to keep it affordable for people without income to occupy land just because they've been there for a while, while it's unimportant for people who grew up in Auckland to be able to afford land. It's a nonsensical double standard - there are plenty of other options for either party to live in, not just younger folk to live in.
A typical dorky idea from local government. Thrash around and find somebody else to pay the bills. Rates are your revenue stream. Set them at a realistic level to pay for your grandiose plans. (and then you will likely be voted out.) Or better yet, cut your extravagance to a level the ratepayers can afford.
Thought you were elected on driving efficiency and keeping a cap on rates. Focus on that please.... Auckland Council employs more ppl than the previous individual councils combined. Find the synergies. You can start with your marketing division... who are you marketing to? I don't have a choice of councils.
Sell your golf courses - they're worth billions!
"The Auckland region currently has 23 golf courses with Auckland Council being the largest investor in this sport. Auckland Council has an opportunity to reconsider its rationale for continuing ownership, particularly given the presence of well-functioning privately operated golf courses."
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12…
Goff is desperate, no more available borrowing for vanity projects. The city is like a lake, its the tributies that feed it, without the constant flow it dies, unfortunately it thinks it's all important but it's just a holding tank for the value to flow through. I.e fonterra head office is nothing without the provinces yet it's counted as Auckland GDP.
To build a normal multi-nodal city, requires a great deal of cross-linking and duplicating of infrastructure - separate nodal sets of infrastructure and the nodes are linked. In a normal urban plan this is all quite expensive and complicated to achieve within the metropolitan urban area.
BUT not in Auckland, because in Auckland the nodes are not within the same metropolitan urban area. In Auckland for reasons known only to Phil Goff & our mentalist planners the nodes are distributed miles apart from each other. This takes the expense from high to OMG where did all the money go.
The best way to fund local government is to remove the existing distortion and make the crown pay rates on its property holdings.
But this should be subject to:
a) central government legislating to make local government fund essentials first - (road maintenance, waste, water etc)
b) requiring business case assessment of all other spending
c) putting large expenditure items to ratepayer vote.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.